NATURAL GAS

SOTU thrill is gone for industry facing EPA methane curbs

President Obama has promoted domestic natural gas development as a key economic driver in his last three State of the Union speeches, offering it as a step toward U.S. energy independence and a lower-carbon future.

And gas developers expect to get another mention tonight. Only this time, its leaders will be less than thrilled.

Industry advocates say the domestic shale boom has boosted Obama's legacy by helping pull several states out of economic slumps, but he undermined them with last week's announcement of proposed U.S. EPA methane emission curbs for new and modified oil and gas developers (Greenwire, Jan. 14).

"If history is any guide, President Obama's State of the Union address will likely include a mix of rhetoric claiming credit for energy achievements with a list of policy proposals that in many instances we believe will actually undermine them," American Petroleum Institute President and CEO Jack Gerard told reporters last week.

Obama's State of the Union shoutouts to gas were often delivered with calls for Congress to legislate on climate change. He even lauded the gas industry in his address last September to the United Nations summit on climate change in New York City.

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The president has repeatedly noted that production from the Bakken, Marcellus and other shale fields has brought down the cost of gas, powering a resurgence in American manufacturing and helping reduce carbon dioxide emissions from the power sector. He often reminds his audiences that oil and gas development has expanded to unprecedented levels during his administration, making the United States the world's leading petroleum producer.

And Obama has used his highest-profile annual speech to show that he is implementing an "all-of-the-above" energy policy.

Obama's 2012 State of the Union included a call for new access for offshore oil and gas development, while last year's speech announced the creation of "sustainable shale gas growth zones" for onshore production (EnergyWire, Jan. 30, 2014).

"My administration will keep working with the industry to sustain production and job growth while strengthening protection of our air, our water and our communities," the president said last January.

But on methane, Gerard and others say the administration has abandoned cooperation with industry in favor of an onerous new regulatory regime that will scuttle petroleum production with little environmental benefit.

Methane -- which is more than 80 times as climate forcing as CO2 over a 20-year period -- is the major component of gas and is leaked at various points throughout the oil and gas system. But the petroleum industry says it has already taken steps to reduce venting and is willing to do more voluntarily.

"The natural gas industry has demonstrated its ability to significantly reduce methane emissions and our commitment to making further reductions through innovation," America's Natural Gas Alliance President Marty Durbin said in a statement last week blasting the administration's regulatory announcement.

Industry points to EPA's own estimate that methane leakage from the sector overall has dipped 16 percent since 1990, even as gas production has grown by more than a third. Much of that reduction comes from new hydraulically fractured wellheads, which after 2012 began phasing in a new EPA rule for smog-forming emissions that also captured methane.

But Gerard said the gains were due to technology investments by operators, and the new regulatory plans do not respect what industry has already done. It is an example of "no good deed goes unpunished," he said.

"I do believe that the president for legacy purposes will try to sketch his broader vision of climate on a global scale next week, and that's why I think there is some possibility he could touch on the methane issue," Gerard said last week.

But any claim that the methane regulation is key to that legacy is "wholly inappropriate," he said.

Greens want tougher rhetoric

Alden Meyer of the Union of Concerned Scientists wrote in a blog post that he hopes Obama will take a more critical tone on gas than he has in years past. Obama should note, he said, that fugitive methane emissions can erode some of the climate benefits of using gas instead of coal for power generation.

And rather than appearing to endorse gas use, Obama should say that it must ultimately be phased down, too, to make way for demand-side efficiency and renewable energy, Meyer said.

"An overreliance on natural gas over the long-term won't allow us to achieve the emissions reductions needed to address global warming," he said.

Environmentalists expressed some frustration last week that EPA's regulatory plans won't include rules for existing oil and gas infrastructure.

"It leaves unanswered what's going to happen with the existing facilities," the Environmental Defense Fund's Jeremy Symons said on E&ETV's OnPoint last week (OnPoint, Jan. 15).

There is some evidence that the president might be preparing to sharpen his rhetoric on gas. EPA Administrator Gina McCarthy said last week at a reporters roundtable that methane must be addressed in any future discussion of domestic development (Greenwire, Jan. 16).

"We need to say more than 'safe and responsible,'" she said, referencing words administration officials have often used in the past to qualify their support for gas development. "We need to make sure we underpin that with actual reductions," she said.

But Frank Maisano of Bracewell & Giuliani said that Obama would still have to walk a "fine line" on gas development because that industry supports his legacy in so many ways.

Not only has it been a bright spot in the otherwise dismal economy of the last six years, he said, but gas has allowed the United States to show the world it can meet its carbon reduction commitments ahead of this year's U.N. talks.

"The emissions profile of the country has been dramatically reduced because of the move toward natural gas," he noted. By swapping coal-fired power plants for gas-burning units, he said, the U.S. utility sector has been able cut its emissions by 17 percent since 2005 -- helping to bring about Obama's pledge of an economywide cut of the same percentage by 2020.

And the gas boom has helped stem U.S. dependence on foreign oil, Maisano said.

"He's always going to be supportive of natural gas, because it is the piece of the puzzle that has created this crossroads that we're at with energy independence, which we haven't been at in 50 years," he said. "That's the key moment, that's the watershed moment that natural gas has provided."

Bob Perciasepe, president of the Center for Climate and Energy Solutions, said the administration is aware of the benefits of unconventional gas development. The methane framework EPA put out last Wednesday was not an assault on the industry but an opportunity for collaboration.

"I think it's a matter of making sure that there's a level playing field for the industry, that it meets the appropriate safety and environmental standards in the processes that they use," the former EPA official said.

The blueprint leaves many questions unanswered, including how new and modified sources will be regulated and how a "modified" source will be defined. Obama may use tonight's address to ask for input on that proposal, he said.

Twitter: @chemnipot | Email: jchemnick@eenews.net

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